Day 15 as a Crypto Newbie: Does RSI Above 70 Mean the Price Will Drop? Should You Buy the Dip Below 30?
I used to worry that I was missing out whenever I saw a coin keep going up. When I saw one keep falling, I’d wonder if it was time to buy the dip.
I’ve recently started learning about the RSI indicator, and I’ve realized that you can’t judge the market just by how much the price has risen or fallen.
1️⃣ What exactly is RSI?
RSI stands for Relative Strength Index. It’s mainly used to measure the relative strength of price increases and decreases over a given period of time.
Many charting platforms use a 14-period RSI by default.
Generally speaking:
📈 An RSI above 70 is usually considered overbought.
📉 An RSI below 30 is usually considered oversold.
But keep in mind!
Overbought doesn’t mean the price will drop right away, and oversold doesn’t mean it will bounce right away.
In a strong uptrend, the RSI may stay elevated for a long time. In a prolonged downtrend, it may also remain low for a long time.
If you short just because the RSI is above 70, or buy the dip just because it’s below 30, you can easily get it wrong.
2️⃣ How should you use RSI?
I now focus on three things:
① Look at the trend.
If BTC is in a clear uptrend and the RSI moves into the high range, I won’t rush to short just because it’s “overbought.”
② Look at key levels.
If the price reaches a previous resistance level, the RSI is also high, and the price then pulls back after rising, that’s worth watching more closely.
③ Look for divergences.
For example, if the price makes a new high but the RSI doesn’t, that’s called a potential bearish divergence.
It may signal that upward momentum is weakening, but it doesn’t mean the price will definitely fall right away. You still need to wait for confirmation from subsequent price action.
3️⃣ The order I follow for analysis
First, I look at the price trend, then support and resistance, then trading volume, and finally use RSI as a supplementary indicator.
I don’t open a position based on a single indicator, and I certainly won’t ignore the risks just to prove my analysis was right.
My biggest takeaway today:
RSI isn’t a crystal ball that predicts the future. It’s a tool that helps me understand current price momentum.
What really matters isn’t memorizing the numbers 70 and 30, but understanding that they can mean different things in different market conditions.
I used to worry that I was missing out whenever I saw a coin keep going up. When I saw one keep falling, I’d wonder if it was time to buy the dip.
I’ve recently started learning about the RSI indicator, and I’ve realized that you can’t judge the market just by how much the price has risen or fallen.
1️⃣ What exactly is RSI?
RSI stands for Relative Strength Index. It’s mainly used to measure the relative strength of price increases and decreases over a given period of time.
Many charting platforms use a 14-period RSI by default.
Generally speaking:
📈 An RSI above 70 is usually considered overbought.
📉 An RSI below 30 is usually considered oversold.
But keep in mind!
Overbought doesn’t mean the price will drop right away, and oversold doesn’t mean it will bounce right away.
In a strong uptrend, the RSI may stay elevated for a long time. In a prolonged downtrend, it may also remain low for a long time.
If you short just because the RSI is above 70, or buy the dip just because it’s below 30, you can easily get it wrong.
2️⃣ How should you use RSI?
I now focus on three things:
① Look at the trend.
If BTC is in a clear uptrend and the RSI moves into the high range, I won’t rush to short just because it’s “overbought.”
② Look at key levels.
If the price reaches a previous resistance level, the RSI is also high, and the price then pulls back after rising, that’s worth watching more closely.
③ Look for divergences.
For example, if the price makes a new high but the RSI doesn’t, that’s called a potential bearish divergence.
It may signal that upward momentum is weakening, but it doesn’t mean the price will definitely fall right away. You still need to wait for confirmation from subsequent price action.
3️⃣ The order I follow for analysis
First, I look at the price trend, then support and resistance, then trading volume, and finally use RSI as a supplementary indicator.
I don’t open a position based on a single indicator, and I certainly won’t ignore the risks just to prove my analysis was right.
My biggest takeaway today:
RSI isn’t a crystal ball that predicts the future. It’s a tool that helps me understand current price momentum.
What really matters isn’t memorizing the numbers 70 and 30, but understanding that they can mean different things in different market conditions.